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tv   Market Makers  Bloomberg  December 13, 2013 10:00am-12:01pm EST

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the heating oil that we need. it is very difficult to switch over to heating oil to natural gas in midwinter. >> thank you so much. alan harry. he is joining us on futures and focus. you're onon the markets again i0 minutes. " is up next.s >> microsoft shortlist list for ceo is one name shorter. one of the candidates will stay at qualcomm and become the ceo there. we will speak to steve miller about the ups and downs of filling the fee suite. suite. ofwe will speak to one ceo one of the largest hotel operators in the country. playing that $400 million lottery with your coworkers,
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daydreams about winning later. for now, make sure everyone signs the contract. you are watching "market makers. " i'm erik schatzker. >> i'm stephanie ruhle. rebecca black, because it is friday. >> the top business stories from around the world. qualcomm has a new ceo. the world's biggest maker of chips for mobile phones announced the change this morning just hours earlier. the microsoft board had been ollenkopf for its ceo job. sales of the 500 seat monster airbus a 380 have been slowing, but in an interview, the ceo says rising traffic should boost demand. deny that traffic
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will grow five percent year on year thanks to asia, china, middle east, so it will double every 15 years. imagine two times more traffic from heathrow. . a record snowstorm in the middle east. it was snowing in cairo for the first time in more than a century. neard three feet jerusalem, bringing traffic to a standstill. >> i want to talk about your hair for the next two hours because it is so kooky. in --s at the fee suite see suite at qualcomm. this morning, steve mollenkopf gets promoted to ceo. two people who know. west johnson is a bloomberg
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editor at large. morningial guest this is steve miller, chairman of , andformer ceo of delphi in his free time, he sits on the boards of united airlines and symantec. extraordinaryan 24 hours. >> someone e-mailed me describing this as a coincidence. if you think things are connected, you can understand the world a lot better. i think what we are seeing here is the ball, board saying, hell no, you will not go. you are staying. used to walk the streets of berkeley saying that. you have seen the situations play out before.
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if you are paul jacobs and you hear that steve mollenkopf might be going to microsoft, what would you do? >> i would do what i could to keep him on. giving him the ceo job makes sense. the microsoft story has been fascinating, has been in the papers and television for months now. it is being led by a good friend of mine, john thompson. i am a director at symantec, i hired john a decade ago, and then lamentably saw him step down. he has the writeup is to be able to do this. does losing a guy like steve mollenkopf make his job that much tougher? >> there are only two people to ever leave the company and they are both on the board of directors. the new person coming in will
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have a big challenge. if they are going to change things at all, it will probably be contentious in the board room. >> what exactly is john thompson searching for? if you look at the skill set that and alan mullally has, he is clearly a corporate leader who knows how to turn around a company. look at the move out of qualcomm -- >> when you look at the names coming up, you have to look at the board and see them struggling with the decision of their future. johnave people like thompson and steve ballmer and bill gates saying, are we going to be a mobile company for the future, or are we going to be a business?d is this -- or are we going to look outside
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for a turnaround to fix everything at the company for alan mullally? >> i think you have summarized the problem they are having their. john will hate me saying this, but i think the best candidate for that position is john thompson himself. ,hat i saw him do at symantec taking it to a $6 billion company, always being ahead of the curve on the vision of where we need to go next. having the leadership qualities you need. >> at a time when these companies need to innovate -- ibm has no innovation. all they can do is play defense. do you need a ceo who is technical? >> steve mollenkopf knows what is going on with the customers. guy, for about 30 years, but one of the things that you do not think about with most of what steve
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ballmer spent his time doing was meeting with customers, going to companies and convincing them to build their products around microsoft software. >> the technology business changes so fast. companies that were two years ago doing well are not so much anymore. hand, what must terrify them is the example of jcpenney. they brought in ron johnson, did a radical shift in their strategy, and it was a complete failure. >> then why is alan mullally's name in the mix? he did an incredible job at ford. is microsoft a turnaround job? combination of things from whoever the new ceo is. one of them is leadership skills. alan mullally showed he has
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tremendous leadership skills. taking an organization that was discouraged, bringing it back and fighting, that is a great skill set. on the other hand, i do not know that he has the technological deal set to figure out what to do next with microsoft. let's think about microsoft as a turnaround, even if it is not. what would you do if you were there? >> i would spend a couple of weeks trying to figure out what are the traces, talking to making mythen assessment as to what priorities we should have. microsoft is not short on technologists. it is short on direction, i think. there is a famous chart of technology companies and one of them shows all of the divisions
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of microsoft. as youthan a pyramid, would normally see, it shows them all pointing guns at each other. are developing technology that exists in other parts of the building because they do not want to deal with those people. they think in organization will do it, but everyone within does not buy it. >> people do not desire what microsoft sells. went to johnson jcpenney, he did not understand what their customer desired. >> i think he misread the customer base or moved too fast to try to shift to a different customer base. the board lost patience. lot more to talk about with you, including aig. here withon is also us to talk about microsoft and qualcomm. a game changer in the hotel industry. how the recession changed how
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people travel. ♪
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>> welcome back to "market makers." i'm erik schatzker. steve miller is here. he is the man the board's turn to when they have a problem. aig turned to him, that is why he is the chairman of the company. aig was clearly a turnaround case. rest of theand the aig board want to see bob and ben moshe a do next? >> we continue to work on the our divestiture, ilfc, aircraft leasing business. we had a deal with the chinese to sell it to them.
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neither side has terminated, we have been looking at other alternatives. even though they are a great company, it is not a good fit with an insurance company balance sheet, particularly with all of their new regulations. a capital-intensive business like that does not belong in an insurance portfolio. we will get on with selling that. before we move onto the next phase, what are some of the options? >> fundamentally the three options ahead of us would be to complete a deal with the chinese. the second option would be to sell to someone else. the third option would be to do an ipo. see the airline business doing so well, is the ipo looking more attractive? >> it has always been attractive. .t has been a matter of choice
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if we were unable to sell all at once, it would still be a balance sheet problem. optionsonsidering all and expecting to get this done in the not-too-distant future. >> what are your concerns with aig and regulation? it is about providing health care to individuals but it is also about regulating the health insurance market. does it keep you up at night for what the market can look like? >> two things bother me about the regulatory landscape. we operate in 100 different companies -- countries, and each has their own regulator. we think it is appropriate to be regulated, but most important is that deregulation is consistent in their approach. >> the likelihood that you will get that? >> we are working on it.
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with the failure of aig five years ago, insurance was at the top of regulators piles. proved insurance companies wrongly handled could be dangerous. so for the first time we now have the federal reserve regulating us as a systemically important that -- financial institution, which is fine, but we also have 50 states and these foreign regulators. want toimportant, we make sure, as insurance is regulated, it is in a different regime from banks. we are a different balance sheet. we have a different purpose in our economies, and so we need consistency across the globe and insurance companies treated for what they are, not as banks. >> are you concerned about how you will be treated by regulators?
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popularook at the opinion, the disdain coming out against banks, some people think that they are a punching bag. what does that mean for you in the insurance business? >> the company that was most hated five years ago was aig. we even took the brand off of everything and renamed parts of the company. everybody wanted to run away from the aig name. but we have brought it back so strongly and rapidly that we have now rebranded everything to be aig. on the regulatory front, instead of resisting regulation, we have welcomed the fed as our premier regulator and we are working closely with them to respond to all of their concerns. >> what did you do right that the banks did wrong? >> partly, they are resisting
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regulation. trust us, we will be fine, we will not run off the rails again. there is this reaction of overregulation on banks. capital ratios to far, they will not be able to lend money to people who need it, and that will be a drag on the economy. where will the capital come from his financial institutions are regulated to the point where they cannot take any risks? >> can we connect the dots to the sale of -- potential sale of ilfc? the sale could go to another company. is already so big in that business, could they get a deal? would that pass muster with regulators? >> i believe so. there is no particular secret
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sauce. it is a hugely competitive business. ilfc does have orders on future boeing.rom airbus and if you look at the resurgence of airlines around the world, those slots are incredibly important. that aigu concerned could be a target for activism? the government is out at this point. you are out on your own. we have run the victory lap for coming out of the ditch, repaying the government. we now have people paying about $50 a share now to come into aig. i feel a terrific responsibility to them to make sure they have a responsible investment that grows over time. to ourtrying to respond shareholders, we talk to them about their concerns, capital
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management they want us to run, what businesses they want us to be in or not. as long as you are communicating with shareholders and responding, you are relatively insulated from attacks by activists. maybe you are insulated by activists, you understand the regulators, you are about to finish ilfc. what comes next? you look at aig, it is the largest global property-casualty company. on the other hand, the life and retirement business is a good business but largely domestic. is obvious thing to consider how to grow globally on the life and retirement side. the population is growing in asia, africa, every other place. >> is that organic or is m&a the only way? >> you can do it organically but
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we would not turn down m&a opportunities. we will be looking at opportunities to grow our business on the life and retirement side. >> i want to get an understanding of where people are on the airplane. have you figured out cup and take -- compensation this year, what should we be expecting for bob benmosche? >> we gave him a lot of stock in the company, stock and options. at the lowest point, the stock was worth less than $10 a share. now it is around $50. he has done extremely well from that standpoint. a lot of the reported earnings benefitsm the stock that he gets from being the leader of our company. >> do you want to continue to pay him with stock? >> look at the value he has created.
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the u.s. government put $182 billion into aig. to see if we could pay it back, we paid it back with a profit of $22 billion, and that is due to the fact that he is an extraordinary leader. what is that worth? it is worth an awful lot to me. >> bob, if you are watching, steve just gave you a you go girl. when we come back, talking about the retail business. ♪
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>> we are talking about aig with steve miller.
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just saying bob benmosche deserves what he gets paid. the man is about to turn 70. how much longer will he be ceo? of a 30s the energy year old, so it is hard to say. he works 24/seven. it is unbelievable. i could never hope to keep up with the pace he has. >> what the board keep him as long as he wants to be ceo? >> it is the board's choice when it is time for a change. we have had what i call succession planning discussions that have been increasing over the past few years, particularly -- we started when bob announced he was battling cancer. he has been successful with that. how much longer he wants to work, not sure. we are doing a lot of
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discussions about how you would find a successor for bob benmosche. , we wille come back talk about the lottery. many of you think you can beat the odds. ♪
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>> welcome back to "market makers." we have breaking news. john malone is getting pretty -- busy. isrter communications preparing an offer letter to purchase time warner cable. this is according to two familiar with the matter. you can see the movement in charter shares, a lot of people hoping that they will step over the big offer, even if it was 1.39, that would be six percent above the current price.
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was apremium to where it 115,e of weeks ago, in the 120 range. isnot forget, time warner also sniffing around comcast. they were talking about a possible joint bid. from what we understand, this does not involve comcast. it would be a charter-only offer. get back to our exclusive interview with aig nonexecutive chairman steve miller. we were talking about turnarounds. you think we will see more over the next couple of years. >> i really do. there have not been that many restructures recently because interest rates have been so low, money is cheap, you can borrow more to keep going.
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banks, with all the pressure on their balance sheets, have been reluctant to force restructuring where they would have to take write-downs. going forward is a interest rates inevitably will go back up. we cannot live in this zero forever.era second, banks have gotten stronger. they will force restructuring swear they are called for. a retails broken in story, whether we talk about j.c. penney or sears, what can't they seem to get right? >> what is happening in the retail sector is enormous growth of internet transactions. in my house every day there is the ups guy dumping a ton of boxes that we used to have to go to the store for. those that are not strong on the internet side and are dependent
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on customers coming to the store are suffering with loss of traffic. lossdly, along with that of traffic is the implication that you have too much real estate. jcpenney has 1100 stores. these are huge stores. if there are not many people coming through the store, your rent will kill you on top of it. the board of jcpenney came to you and said, would you consider running this company? what would you say? >> texas is beautiful this time of year. >> right now, they have michael running it. he is a very experienced retailer. his time will come. >> that is a definite maybe. what would you be thinking about? >> i have never said no to any
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particular turnaround, as long as i thought i could be helpful. i have been in the steel industry, garbage industry, insurance, auto parts -- with the board sat down you now and said they wanted you to be the new ceo, what do we need to do today? >> i do not know what i would do today. this is what happened at ibm. they wanted to think about things before going forward, but it turned out to be the best thing. the first thing is to be thoughtful, but the second thing is to be decisive. between jcpenney and sears, which one is easier or harder to
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turn around? >> both are in a world of hurt. both have lost the brand cache. jcpenney had it with a certain group of customers. they have really lost it by saying we will not do discounting anymore. they lost all those people and it is now harder for mike to bring them back. we are sorry we did that. we are now going to do discounting again. i wish him well. november,lts in jcpenney was one percent above was year, and last november hurricane sandy and the depths of the plummeting of sales. their recovery is slow and hard, and even the sales do not have the final answer. has eddie lampert
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underestimated how hard it is to run a retail business? theis biggest concern is real estate, even more than the department stores. recovery ineen a real estate. if the economy accelerates in 2014, do you think he will be proved right? >> that is a tough call. retail is highly competitive and you have this title wave coming through of internet sales. that is not going to slow down, it will be tougher and tougher for those retailers that have enormous investment in the real estate of big stores. >> even if the market picks up, who will be there to pick up those spaces? it is a real box they are in and i do not know what the
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answer should be. >> i want to ask you about gm. they are about to find out what it is like not to be under government ownership. barra will be succeeding dan ackerman. how much easier will her job be? aig, theerience at government actually -- by and large, left running of the business to the board of directors. you did not have government types running up and down hallways telling people what to do every day. the heavy hand was not as heavy as you might think. there were a few hot button with, that you had to do but gm did not change their product plans because of the government. they were investing heavily in
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china, doing other things that you might not think were possible. i think mary is a spectacular choice for gm. she has enormous credibility within the company. her focus on looking at things from the customer's eyes, as opposed from and engineers' will help them respond. >> we will not see any sort of exodus from gm executives? >> no, i do not see that. people in the car business love that business. has been featured as someone who might leave, but where else would he go? the car business is so engrossing, i think he will stay. >> great to have you here, steve miller. you name it, he has been in it.
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a turnaround expert. when we come back, we will talk about one of my favorite things, room service. what travelers are looking for from the hotel. we will speak to the ceo of one of the biggest hotel operators in the united states. ♪
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>> it was the biggest hotel company deal ever. elton whirlwind raises $240 billion making a bundle for the blackstone group and turning a spotlight on an industry that has roared back. the big unknown is how much longer the boom times will last. we would say we are at the
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beginning of the middle of the cycle, call in the fourth inning. the sweet spot of the cycle is you are getting to the point where you have built your occupancy levels back and the growth going forward becomes dominated by rate increases. increases drop at a high percentage to the bottom line which gives you greater margins, thoseis why we believe assets will do exceptionally well. >> one-man hoping that he is correct is right beside me, tyler moore, a budding hotel magnate. he owns and operates are pretties for hilton and marriott and has just developed his own boutique hotel in new york city, the highlight hotel. are we in the fourth inning? it seems pretty early given how well the industry is doing. >> i think he is right. we are early in the game. in the united states, occupancy
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statistics, we just came back to peak occupancy after five years way below peacock. see -- peak occupancy. why isn't that hotels this time around seem to be more profitable, and as a result the stocks are doing better than they were five or six years ago? >> you have very low supply growth for the past six years. >> no new hotels coming on pretty much. >> it has been very hard to get development financing. in the boom days, the banks are lending at 75% loan to cost with no personal guarantee. loan, get a development 50% loan to cost with a full personal guarantee. so that is keeping a lot of the amateur developers out of the markets. hotelton is the biggest
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company in the world, very diversified from the bottom to the top end, waldorf-astoria, conrad -- tell us about your business. what is your sweet spot? >> we focus on cash flow. >> [laughter] anywhere you can find it? >> there are 5.2 million hotel rooms in the u.s. the best returns on investment are the residence inn by marriott and the hampton inn by hilton. >> not high-end names. >> they have the best returning customers and return on investment. you get free wi-fi, breakfast. most of the hotels you get free dinner. that is a great return on investment for the customer. everybody likes to talk about the luxury brands, but what they capex.talk about is the
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astoria's it is a lot, and it is tough to keep up. >> the highlight hotel is here in manhattan. it is high-end, no doubt. >> you have to have a point of differentiation. it is the most unique and i have ever been a part of. it is in an old seminary, used to be the dormitory for the priests. it is a unique guest experience. only 60 keys, so it is very manageable from a size standpoint. it is a very intimate experience. that is our point of differentiation. we are able to provide a unique experience versus midtown manhattan. hline.re is no other higli
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the park is pretty unique, but do you plan on expanding to other areas like washington, chicago, seattle? >> we would love to do that with special buildings. that is the key. >> is that when you are prospecting for? >> in the last 10 years, the internet has leveled the playing field. the customer can find a special product quite easily. 20 years ago, the brand was much more important. how old a hotel was, what the quality of it was, in 1985. and youu can go online can get almost all the information about a hotel almost immediately, and it gets people excited about staying in a landmark building, which has history and character to it. >> we will have to check it out. thank you for coming along,
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tyler. we have lots more coming up. we will be talking about the lottery. the chance of a lifetime. can you beat the odds? numbers onching the tonight $400 million jackpot. ♪
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>> welcome back to "market makers." i'm stephanie ruhle. it is friday the 13th. if you bought a lottery ticket, you will find out at 11:00 if you can quit your job on monday. olivia sterns has been trying her luck shopping for tickets. participantottery -- player. clearly, i do not even know what to call it. what are the odds? >> one in 259 million.
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toause the jackpot is up $400 million, everyone is out buying tickets. perspective,t in the odds of being hit by lightning, one in 10,000. >> what is the value of each ticket? 256 million is the odds. tickets are only one dollar, so why not go out and purchase every number combination? you would still get a profit. but you have to think other people could get the same numbers, and then you would have to split it. if you win the jackpot, a lot of people take the lump sum, but then you would only get about 200 $16 million, so you would be
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looking at a loss if you had bought every ticket. >> scarlet fu, do you want to weigh in? i know there is an office pool going around. >> we could not resist the odds. we decided to try to put together an office lottery pool. the problem is, a lot of people put in one dollar with their coworkers. what happens is someone buys the ticket and says, actually, i bought the winning ticket on my own, this is not the group ticket. or somebody will say that they did not get enough money. >> are you suggesting greed may play a role? >> maybe just a little bit. there are proper ways to do this, let's say. if you google lottery lawyers, there is a whole group out there. it is a specialty in law school.
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the first thing you want to do is choose a leader. i will appoint myself. >> does that mean that you get a bigger cut? >> i do not. i just put together the contract. two pages, standard legal language. you make copies of the tickets. these are the originals, everyone has a copy. nobody can claim later on that they're winning ticket was not part of the groups. and then you pay your money. did you pay before or after the numbers came out? >> the website that you got this contract from, do they get a cut? on successfuled contracts in the past that people have worked out. there have been plenty of lawsuits about the sort of thing. you also wonder what happens if you lose a ticket.
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you have to sign the thing and put your signature on it, otherwise -- >> that is why you hold onto the original. >> what are some examples of losses? >> people paying money, not showing up to work the next day, but they actually want to split it with a smaller group. that is why you need to sign the contract. >> no notary present? >> we have it on air. up,other issue that comes if you win the lottery -- let's we win. can you stay anonymous? most people would prefer to stay anonymous. only six states allow you to stay anonymous. unfortunately, we do not live in
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south carolina, delaware, maryland, or the others. it would be fun to get on tv with a giant check. marketing drives sales to the lottery, so if you withdraw names, people think that perhaps it is fishy. if you release the names, then people will believe in it and will spend more money on it. >> and that is what will happen on monday. >> you can see the picture of the winners on the mega millions website. >> bottom line, the odds are against you. >> but you have to be in it to win it. >> did we all sign? >> thank you, ladies. " will be backers in a few minutes. next, a big surprise. stuns her fans by
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dropping an album overnight. ♪
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>> live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle. >> is it time for sac capital 2.0? they are making major changes at the hedge fund in the wake of record insider trading settlements. bitcoin.d by and new poll says most americans do not have a clue about the virtual currency. they think it is a smartphone apple or even a videogame. >> and beyoncé -- mrs. carter shocks the music world. she releases a new album overnight without warning. surprise, surprise.
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we will talk to the editor of billboard magazine about what this means for the record industry. it isis "market makers." friday, the 13th. i am erik schatzker. >> and i and stephanie ruhle. we have a lot to cover. let's break some news. >> charter communications is preparing an official offer letter to buy time warner cable. the offer would be the for less than $140 per share. that is more than time warner cable was trading up this morning. we will show you where things stand as we bring in alex sherman. he broke the story from his desk. how confident should we be that this offer letter is coming? you have reported that they are preparing it. what is next? >> sorry i cannot join you up there. that charter is preparing this. it could come as early as next week.
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we feel pretty confident that next week will be a good time for this to come. just in the sense that there has been a lot of momentum on this. there are multiple stories that they're interested. here are some details that are important. the offer letter will be done solo. comcast or cox, which have and speculated to possibly do a joint bid, will not be a part of the offer. it will be a combo stock cash offer. it will be backed by liberty media with the chairman john malone. he has a huge -- history in the cable list -- industry. that is what is driving this unusual offer. they went to acquire a much larger company. we know that price tag there. we do not yet know how much less. time warner cable is trading at $133 per share. the offer could come in at 135
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or 130. i am still in my desk trying to figure that out. >> tell me something. the offer letter serves what purpose? is it to communicate malone's intentions or is it to smoke out charter and cox? >> i think it is the former. it is to communicate their intentions. they have wanted to do this friendly. they have wanted to work a deal where they did not have to go public. they put out an offer. time warner cable has not wanted to play ball. we put out a story last week saying that the markets would be willing to sell the company if they got the right offer. that still stands. the question is, is that offer coming in and really going to push time warner cable to you a friendly deal? chances are no. sources familiar said they might accept a deal at $150 or $160. today, said that is not common.
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a lower offer will come. the deal is to put pressure on the shareholders to do their deal. that is what the strategy is. put the offer out there and let the shareholder pressure convinced the board that they need to do a deal. if they do not, then the share price may start to fall. >> do have an idea how the shareholders are feeling? they seem to be into this in a big way. they went to see john malone in denver. did they seem to be behind to this? >> craig moffett is a friend of the show. denver earlierin this week. the number of shareholders went to that. i believe that there is a key him of shareholders that want to do this. particularly because the stock has run up so high at this point. there's a lot of pressure that some deal will come together. >> great scoop. thank you for
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telling us more about it. alex sherman of bloomberg is making himself a must read by- line once again. go see it on bloomberg.com. breaking more news on time warner cable and charter. >> let's turn to a different kind of is. we're coming to the end of the fourth week of the michael stenberg trial. government is about to rest its case. it has not done quite as smoothly as they might have hoped. the big issues are how things are working regarding the chances and what are the implications for sac capital and steve cohen? we have been following the trial closely and are joined outside the courthouse in lower manhattan. where do things stand right now? >> as you said, the government is wrapping up its fourth week of testimony. they're about to rest their case. it is safe to say that there
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have been unexpected hiccups in the case. they did have some strong point early on. they provided strong evidence and suggested that they had traded on inside information. have managed to create some doubt about how reliable they were as witnesses. there is one other wrinkle they have to contend with. lawyers never like to send a jury out to convict someone right before the holidays. with the trial set to wrap up, that is exactly what is about to happen. that is another big risk. >> what about steve cohen? what picture has emerged about him? >> he has been referred to as the white whale. he was the real target all along. people knew that all along. he was never charged and he maintains'tis innocence. we have gotten a strong picture of what his role was in some of these traits.
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the government has alleged that he traded some of the same stocks. you can see from the evidence presented that he took steps to conceal where the information was coming from. in one instance, he even told the board that he misrepresented where they were getting and formation. they said it was legitimate information. there was another case where they discussed conference -- information. he said,, i do not want to talk to this over -- about this over i am. that may have saved him in this case. atcareful, but if you look how this played out, he had to pay $1.8 billion in fines. you have to look at what this means. his is important to see? relationships with investment banks. we know he has given money back. we know that would be the case.
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we are starting to see his changes in relationships of the banks. when he had $30 billion, the influence that he had -- getting meetings and the biggest allocations, he was able to put huge efforts on this treat. -- the street. deutsche bank is pulling the credit line. why are they going to give him the best prime services and treatment when he is no longer a plan on client? there is a big difference in someone like him saying we will be a counterparty to it. difference and there could be huge ramifications. >> are you getting that sense that whatever they turn into, now that they are a family office and proceeding from this trial, steve himself and his family are going to be shadows of their former selves? >> yes.
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they are undergoing some serious transformation. they are changing from one of the most powerful trading hedge funds in the world into a emily office that will be leaner. one of the top executives is going to leave. he was responsible for recruiting. he will not need him anymore. the fact is that they still have which hasth the sec, accused him of failing to supervise his employees. they would like to be in him for life from the investment for cash advisory business. this will not get resolved until much tear. >> think about this. inc. about the edge that you have. this is about inside information. >> i have a huge edge. >> he is talking about getting access. why would banks give that to him? they used to get paid a lot and they are going to anymore. go fish. >> what is fascinating about
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this and may be you can think about it as well, we reported the government investigation. the questions kept coming up as to whether or not the government intended to bring down sac capital. bring capital charges against it. regardless of how this ends up, the scrutiny seems as though they may actually succeed in doing that. if you eversk any of the prosecutors, they would say no. they did not. they were just trying to stamp out wrongdoing. one of the side effects of indicting our major financial firm is that they manned up going out of business. one of the things that is interesting is that it seems, based on the report that deutsche bank is the only from the man stopped doing business
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or withdrawn business from sac in light of this indictment. i have talked a lot about loyalty on wall street. these firms -- they have gone on tv and said they will continue trading. they have been willing to stick with them through these legal problems. >> sticking with them and giving them plan on terms is two different things. >> thank you for that reporting down by the courthouse. any event come back, that brings together certain a brennan mark zuckerberg -- you cannot call it anything but stellar. we were there on the red carpet when the stars came out. we will have the next. >> and it is time to play the yearbook in. this man is a billionaire geologist. he graduated from amarillo high school in texas. that is all our producers are telling us. you can help us. tweet us your guesses. we are waiting for you. ♪
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>> you are watching "market makers." some americans think the bitcoin as an xbox. others think it is an iphone app. most people have no idea it is a virtual currency. some startups are convinced that that will all change. is one. it helps merchants to accept bitcoin and it may very well become the main currency of the internet. tony is joining us from atlanta. tell us about it. what do you do in the bitcoin world? >> good morning. we are a merchant service. same wayfunctions the that a traditional merchant acquirer works. we get merchants to accept new forms of payment. bitcoin does not work anything like credit cards or paypal or
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anything that we use today. businesses need new software and new tools that do services to facilitate receiving payments and bitcoins. >> so you take the payment and you give the merchants cash in dollars? >> if that is what they want. you can also keep the bitcoins. >> i was just going to ask. if you are an intermediary, you're effectively making a market in bitcoin. that is a risky business, isn't it? well, we have to limit our volatility. if we ask our merchants to collect a certain amount of dollars, we pull a spot rate. we ask the customer to pay that amount. we do not leave it out there for ever. we have a narrow time window of 15 minutes. if the customer pays in the 15 minutes, we guarantee that the business will get $100. is it -- it is volatile, but it
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is not that volatile. -- average person pays volatility does not affect us. >> you pay a piece of the transaction fee? >> we have a pay-as-you-go fit -- plan. compared to credit cards, we are one third of the price. we recently switched to a software pricing level. we have eliminated all of our transaction fees. you pay one monthly fee for a set of features that you need. you can use that all you one. >> what kind of merchants are you targeting? it seems to be adventurous, so what kind of merchants are you trying to bring into the us. >> there is a lot of pain in trying to take payments today. where we are getting some traction is where there's the most pain in payments. that is where you would expect. businesses that are selling things over the internet, they have a much higher risk of fraud
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than businesses and retail stores. company selling high ticket items or expensive items. they have a much higher risk of fraud and are much more likely to get hit with stolen credit cards. you also have a cross-border issue. if you try to sell something to someone in a foreign country, a credit card will not work well. the queen is borderless by design. that makes it very easy. it is a lower risk and lower cost form of payment. >> how quickly are you signing up? there are a lot of skeptics out there. the proof would be how quickly you are converting potential merchants into users. >> sure. our growth is exponential. we had about 1000 merchants. in september, we crossed over to 10,000 merchants. we have grown 50%. we're are up to 16,000 merchants now. >> this is an average of how many per day? >> we're are getting about 400
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per day. >> thank you very much. thank you for sharing that with us. tony is the cofounder and ceo of bitpay. you can call them the oscars of silicon valley. the stars of the tech world came out for the breakthrough prizes and the scientist went home with $3 million each. ceos.est list included 23 enemy was told to halt sales of their genome project because they did not have regulatory approval. >> we're talking about big innovation. the fda has halted part of your attempt. what is the latest on that? >> we are working aggressively and i believe that the fda is committed and we are committed to a tract to consumer path.
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there should be some kind of way that we can have a big science. everyone can get access to their genome. there can be a massive community where work is solving the world's problems of health care. >> to pharaoh that is unfair? are they trying to make an example of you? >> we fell behind. that is a complicated area. we recognize that. it is not a clear path about how to regulate. we are all committed to it. we're going to do everything that we can to show the fda that we are committed to this process. >> when do you think it will be back on the market? >> we are still selling now. we have raw data. we're hoping that we will work with the fda to get back on track soon. i would love to give you today,
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but i do not know. we will work hard to make sure they can get access. >> emily chang is with us now. i have spoken to her and i know she is like. she is passionate about her product. did you get her sense -- a sense that her attitude has changed? it seems as though 23 and me was trying to teach the fda a lesson. the fda said no way. not talk to the fda for six months. i got the sense that she took responsibility. she said we fell behind in terms of communication and it seems like they learned their lesson. it is definitely going to be a tough road ahead. critics say that it is not written in science. there is no interpretation by doctors. you have people running around -- the service analyzes your dna. her own husband is the google cofounder. he found that he had a risk for
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parkinson's disease. you have some people who think they have a risk for a disease that they may never get. as a problem. proponents say we have a right to this information. there is a lot of regulatory issues. i talk to a genetic expert who said it will be many years before the these tests are proven to be valid. have big3 and me challenges ahead. >> we will have more of her injuries from last night coming up at 1:00 eastern. >> when we come back, obamacare with a twist. one governor shows washington a different way for health care. we will hear from him in a few minutes. ♪
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>> welcome back. mexico clears the way for a $20 billion windfall. that is today's latin america report. the lower house has given its final of cruel. the government 75 year monopoly over the oil industry has come to an end. that opens the door for companies like exxon mobil and shell to develop oil reserves. there are forecasts that that could mean another $20,000 per year to the economy. gdp will rise at half a percentage point. they have called the energy bill the cornerstone of the administration. opponents are not convinced. they say all it will do is funnel wealth to foreign investors. shocker. that is today's latin america report. >> love the way she says that. >> when we come back, it is not
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the season of good cheer. things have just gotten worse. we will have an exclusive with hairy reed. ♪
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>> live from bloomberg headquarters in new york, this with erik anders" 70 role. >> congressmen are crusted country have rejected the heart of obamacare. help lowerned to income americans. list here he ran stat, republican, has another idea. same people with his own plan. he wants to charge his own premium. late last night, he finally reached an agreement on those
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premiums with the department of health and human services. i spoke with the governor before it was announced. >> we are looking at an alternative to the expansion of medicaid. we have the goal of being the healthiest state in the nation. we want people to take ownership of their own health. we want people to do an annual risk assessment and physical. they should pay a modest premium. we believe that that is critical to improving health outcomes. that is what we have been negotiating for months. our whole goal here is to increase -- encourage people to do the right thing. -- we haveical, found, i was president of the medical school. we did health risk assessments. it was really a good tool to help people to improve their own health. we're committed to not only covering more people, but
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to improving the health of iowans. >> is this a model for what other states with republican government can do? >> yes. my staff has done a great job of working on this. he has talked with other republican governors. know that tennessee and pennsylvania and other states are looking at what we're doing. it is not too dissimilar to what indiana and arkansas already have. the request that we have for a waiver is original. i went through this before. we and wisconsin and michigan got waivers. we were able to get national welfare reform. we cut the rolls in half. we think we can also make a real difference in improving the health of our people. we have a goal of being the healthiest state. we have made great progress in that. we won hhs to give us the
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opportunity to demonstrate that getting people to take ownership of their own health really does work. >> you and i both know that the rollout of healthcare.gov has been a disaster. the president himself has acknowledged as much. then how much trouble administration has, to regret not setting up your own exchange? >> no. we are contemplating the possibility of looking at doing a regional exchange with neighboring states that have a similar approach. we think that the federal government has badly mishandled this whole situation. >> which states are you working with? south dakota, nebraska, and kansas are all similar in size. similar philosophy. they have governors that are all republican. there are insurance commissioners with good relationship.
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we have not reached any agreement. we have a thought process of how we could this -- to find a system that would work. we could get the smaller states together to work to improve the health of our citizens. >> i want to ask about your relationship with the chinese leader. it is unusual for a state governor like yourself. you have this relationship that you do. how did this come about? >> when i first became governor back in 19 -- 1982. i was 36 years old. we established a sister state with china. andgovernor came to iowa invited me and my wife to lead the delegation to china. we went there and the next year, a young man led in agriculture delegation. he was a local party leader at
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the county level. the director of feed association. camed four other men during spring planting time. they were in my office on the 29th day of april. i signed an italian then moved to iowa and he took them all over the state of iowa. they went to muscatine. they visited farms and factories. they went to clinics and birthday parties. they went on the mississippi river. he was so impressed with the friendliness and hospitality and how well he was treated in iowa, that when i came back in as governor, i got a chance to meet him in the great hall of the people. that all he remembered about iowa -- he calls us old friends.
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d.c., icame to visit invited him for a reunion. in iowa. >> how can you use that friendship to benefit the people of your state? >> we are the leading corn producing state and the leading pork producing state. china imports more soybeans than all the other countries in the world. one of the reasons we have good prices on soybeans as the demand from the chinese marketplace. are now purchasing a significant amount of pork. a major chinese company just purchased -- why did they do that? because they want a safe, reliable supply of pork. this is going to mean better pork prices. iowa is a leading pork state. we have a number of business contacts with them working for investment. we're creating jobs iowa. >> that was iowa's governor
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talking to me about health care. it is amazing. this unusual relationship. who would have spent it? >> and when we come back, a record that came out of nowhere. beyoncé released her new album at midnight. surprising and delighting her fans. we will speak to billboards executive about what this means for the music industry. you are watching bloomberg tv. we are streaming live on your phone, tablet, and bloomberg.com. ♪
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>> beyoncé has a new album. without a multimillion dollar advertising campaign or a huge launch party, she stealthily released her solo album exclusively on itunes last night. is this the start of a new tradition? i want to bring in the editorial director for billboard magazine. we expected an album for the last year. the super bowl had nothing.
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you're the guy in the know. did you know this was coming? >> i knew it was coming about 45 minutes before the rest of the world knew. i had to sit on my hands to keep from screaming it. i was sworn to secrecy. normal human pop stars, when they play the super bowl halftime show, that is when they release their albums. she does not need those business models these. lady gaga this week -- >> lady gaga this week has a tour coming up this spring. does this make her look foolish? she spent no dollars. >> i don't think it makes god belloc foolish. there are a million ways to skin a cat. lady gaga goes straight to the fans. when does this happen in your lifetime or you got to experience music without having any idea what to think of it? the artist has not explained it.
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there is no critics telling you to like it or not like it. it is just direct to fan. that is the way that we experienced last night. like fresh white snow. it was amazing. >> she is coming to new york next week. $2000 for front row seat. will that get higher? >> this just became the place to be. what i love about her is that she released an album a few hours ago. she has an amazing year in music. she had a blockbuster tour. she played the super bowl halftime show. the shows how the missed -- business of music is changing. it is about how you to yourself and your own brand. you have all of these opportunities. on top of it, she put out this amazing work of music and art. >> billy joel is about to a set of conference -- concerts. people go because he is the piano man. they want to hear songs that
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he's -- put out years ago. who will sell more? >> you're talking about someone with 30 years of history and 30 years of fans both. he has older fans with more money and more disposable income. these are two artists that -- neither one is capable of selling out. >> i want to talk about what is motivating beyoncé. you have come out with your top charts. ryan lewis and macklemore up there. they are the top duo. they released without a label and it on their own. is she trying to say she wants to be like them? i do not see her on the top of your chart. >> she is not on the top of our chart because she did not release music. it is a safe bet that she will be a pretty big in 2014. i think with this is about is that she is really seizing the direct to fan opportunity.
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everyone was expecting an album and when it did not come, they thought maybe there were problems. i think that she really just wanted to smack the haters and the twitter birds. this is essentially what she did. >> tichy also want to smack spotify? she gave this exclusively to itunes. what does that say? challenging when there are so many ways to hear and experience basic. you can only debut in one place. artists have to create different exclusives. they create their own bum and remix. >> pitbull remix. >> there is nothing wrong with that. will involve partying and international women and it will be hot. really,that beyoncé when you reach a certain level
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of an artist, you do not need labels. they played a big role in getting her to this point, but when you are this day, it shows that you can direct to fans. >> you need a pin -- pitbull dubbed remix. 2013 top picks from billboard, check them out on billboard.com. when we come back, we have an exclusive interview with the harry majority leader, reid. al hunt is next. ♪
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>> welcome back. the house passed a bipartisan budget yesterday. the first in over four years. and now goes to the senate, where relations have been going downhill. republicans just forced to straight all nighters in the ongoing fight over the rule changes.
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al hunt sat down with the majority leader this morning and asked him about the senate taking out the budget deal next tuesday. think it would be suicide if they did not pass it. it is a landmark. not because of the size of it, but because of what it does for the congress. for the american people. >> al hunt joins us now from the washington bureau. good guest. nice going. what else did he say? >> a whole lot of stuff. he talked about some kind of compromise that they are working on. janet yellen will be confirmed next week. he does not know anything about stanley fischer, who will be nominated for vice chair of the fed. he was not sure what the republicans would do on the debt ceiling next february. no great surprise, he says that democrats will keep control of the senate. >> how angry as he?
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>> not really angry. he is harry reid. you do not see a lot of passion. i think he does not have any regrets. thisw much longer is business of keeping the senate running going to continue? did he talk about the effectiveness of this as a tactic and whether it might backfire? maybe they will not get everything done before christmas. >> i actually got a deal late this morning. they will not have a weekend section. they're coming in on monday. they have agreed to vote on certain things. they're taking up the budget. -- i think that the peak of the examinee -- insanity is over. >> what about the republicans?
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the insanity may be over, but having used the nuclear option and this 24-hour tactic, i have to imagine that republicans are furious. coaster.s a roller the democrats were furious when they filibustered well over 100 obama not -- nominations. that used to be used for big issues. the republicans are now furious that he changed the rules in the middle of the game. there is a lot of theory on capitol hill these days. >> i know i am going to watch tonight. what else would you do on a friday night? entirewant to watch his interview, tune into political capital, tonight at 9:00. guess what else it is? friday. it is time to play the yearbook in. this man is a billionaire geologist, he graduated from amarillo high school in texas. that is all our producers are telling us.
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we're trying to figure it out. you can help us out. tweet your guesses. you?now who it is, don't >> i do because someone got it right on twitter. i know now. ♪
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>> christmas gift came early. they gave eric and i the answer to the yearbook game. i could not guess this. >> i could not either, but al
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hunt did. who is this? >> did you go to high school with him? >> you're killing me. know that it is boone pickens, he went on to oklahoma state to graduate. he is an old cowboys alum. >> it was not only al hunt who got it. who is our twitter winner? dangelo. e-mailed it. as did a number of other people. >> we were clueless. that is why it takes a village. al hunt, thank you so much. thank you for watching. have a great weekend. we have a great week coming up. >> we will talk to the founder of the world's largest equity firm.
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steve schwarzman is coming on tuesday. and many other great guest. have a fantastic weekend. is 56 past the hour, that means that we are on the markets. alix steel has more. >> thank you so much. it is time for today's options index. traders are itching to get into options after one of the most anticipated ipos of the year. how do you do it? is it anything like a lottery ticket? i am joined by elizabeth. it is important that options are not available yet on hilton. >> it usually takes at least 10 days for the exchange is to list options. it varies due to volume requirements and things of that nature. it will probably take about two weeks. >> we're looking at christmas. what is the typical strategy for an ipl? >> a lot of traders like to
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trade around events. even something like facebook being added into the s&p 500. this is something that traders may do. i assumes the ticket? that they buy some kind of call in the future. is that about right? >> long data is out. >> how long do they do it for? >> it could be anywhere from three to six months or a year. it is a great way to get a hold of options and stocks cheaply. do how does it normally go? want to find the call and then by the underlying stock? >> it really depends. you can do one of two things. by the option and just sell out of it or by the option, exercise the call option, and sell the stock immediately. >> what is a good example of where that might've worked well? >> for example, twitter.
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the n calls for trading were around $.30. the ones that expired today could have been bought for $.30. they sold yesterday for $11. >> or you could buy the underlying stock. that would give you another strategy. >> you could have sold yesterday for $55. >> this is based on the idea that the ipo was priced correctly. is that still the case? >> there's a lot of research in this area. they have done a lot of study is an ipo. if you use the book building -- therehe ipo will be is a tendency to be discounted. theoretically, yes, this works. >> what is the risk? >> the risk is small if you buy the call. it is really just a premium. >> when you say that things are priced correctly, if you look at
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facebook, there was so much hype. facebook was definitely a flop eventually passed initially. it was the worst ipo in decades. it has really turned around. it is $.38 per share. is trading around $.52. >> thank you so much for your options. we really appreciate it. we are on the markets in 30 minutes. "lunch money" is up next. ♪
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>> welcome to "lunch money," where we tied together the best stories and business news. i am adam johnson. around the world, north korea uncle of kim jong on. more airlines want that airplane. this is a bloomberg exclusive. in media, spotify is giving away its service, but it does, the price. to wildcard, how

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